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Gross Profit Margin Calculator

Please enter valid positive numbers for both Cost and Revenue.

function calculateProfitMargin() { // Get input elements using exact IDs var costInput = document.getElementById('cost-input'); var revenueInput = document.getElementById('revenue-input'); var errorMsg = document.getElementById('calc-error'); var resultsArea = document.getElementById('results-area'); // Parse values var cost = parseFloat(costInput.value); var revenue = parseFloat(revenueInput.value); // Validation logic if (isNaN(cost) || isNaN(revenue) || cost < 0 || revenue < 0) { errorMsg.style.display = 'block'; resultsArea.style.display = 'none'; return; } // Hide error if validation passes errorMsg.style.display = 'none'; resultsArea.style.display = 'block'; // Calculations // 1. Gross Profit = Revenue – Cost var grossProfit = revenue – cost; // 2. Gross Margin % = (Gross Profit / Revenue) * 100 // Handle divide by zero if revenue is 0 var grossMargin = 0; if (revenue !== 0) { grossMargin = (grossProfit / revenue) * 100; } // 3. Markup % = (Gross Profit / Cost) * 100 // Handle divide by zero if cost is 0 var markup = 0; if (cost !== 0) { markup = (grossProfit / cost) * 100; } // Update DOM with results (formatted to 2 decimal places) document.getElementById('res-profit-amt').innerText = '$' + grossProfit.toFixed(2); document.getElementById('res-margin-percent').innerText = grossMargin.toFixed(2) + '%'; document.getElementById('res-markup-percent').innerText = markup.toFixed(2) + '%'; } function resetCalculator() { document.getElementById('cost-input').value = ''; document.getElementById('revenue-input').value = ''; document.getElementById('results-area').style.display = 'none'; document.getElementById('calc-error').style.display = 'none'; }

Whether you are running a retail store, a SaaS company, or a dropshipping business, understanding your numbers is the first step toward profitability. Our free Gross Profit Margin Calculator helps you instantly determine the health of your pricing strategy by analyzing the relationship between your cost of goods sold (COGS) and your revenue.

How to Calculate Gross Profit Margin

Gross profit margin is a financial metric that calculates the percentage of revenue that exceeds the cost of goods sold. It essentially tells you how much profit you keep for every dollar of revenue generated after accounting for direct costs.

The calculation is a simple two-step process:

1. Calculate Gross Profit: Subtract the Cost of Goods Sold (COGS) from the Revenue.
2. Calculate Margin Percentage: Divide the Gross Profit by the Revenue and multiply by 100.

Gross Margin % = ((Revenue – COGS) / Revenue) * 100

Real-World Example

Imagine you sell a custom coffee mug.

• You sell the mug for $20.00 (Revenue).
• It costs you $12.00 to buy and print the mug (COGS).

First, calculate the profit: $20.00 – $12.00 = $8.00.

Next, calculate the margin: ($8.00 / $20.00) = 0.40. Multiply by 100 to get 40%.

Margin vs. Markup: What's the Difference?

Many business owners confuse Gross Margin with Markup, but they are very different metrics that can lead to pricing errors if swapped.

• Gross Margin represents the percentage of the selling price that is profit. It can never exceed 100%.
• Markup represents the percentage added to the cost price to determine the selling price. It can be higher than 100%.

In our coffee mug example above, the margin is 40%. However, the markup is calculated as ($8.00 Profit / $12.00 Cost) * 100 = 66.67%. Knowing the difference ensures you set prices that actually cover your overhead expenses.

What is a "Good" Profit Margin?

Profit margins vary wildly by industry. A grocery store might operate on very thin margins (typically 2-3% net, with gross margins around 20-25%), relying on high volume. Conversely, a software company or a luxury jewelry brand might see gross margins upwards of 70% or 80%.

Generally, a 10% net profit margin is considered average, 20% is considered good, and 5% is low. However, you should always benchmark your Gross Margin against competitors in your specific niche to gauge performance accurately.

Why Monitoring Margin Matters

If your gross margin starts to decline, it indicates that either your costs are rising or your pricing pressure is increasing. Regularly using a margin calculator allows you to:

• Adjust pricing strategies before you lose money.
• Negotiate better rates with suppliers to lower COGS.
• Identify low-margin products that may need to be discontinued.